Do Not Wait: Raise Your Concerns Timely or Risk the Run of the Status of Limitations

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“Too often in our family law practice we are confronted with the problem of a non-disclosing spouse. Most typically, this is a self-employed spouse or a spouse who runs his or her own business.”

All civil litigators must contend with the issue of the statute of limitations. Few things are worse than telling a client with a viable claim, “I wish you came to me sooner.” In all areas of the law, acting timely is critical to safeguard the client’s rights. As lawyers, it is our duty to warn clients to act timely, as the following case illustrates.

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Bob and Janet married in 1984, and separated 30 years later in 2003. Throughout their marriage, Bob held numerous high-earning positions, while Janet raised their children and took care of the household. Clearly, aft er such a long marriage, Janet was entitled to spousal support.

Unfortunately, in the last couple of years before the separation, Bob lost his lucrative job and could not find a replacement position. While Bob and Janet were negotiating their divorce settlement, it seemed apparent that Bob would not be employed any time soon. Janet reluctantly accepted a settlement in which Bob did not have to pay spousal support.

Unbeknownst to Janet, Bob did have employment prospects. At the very time he was negotiating the divorce settlement, Bob was engaged in another negotiation — with a major technology company to be their new vice president of marketing. The new contract provided high compensation and a competitive benefits package. Bob signed his new employment contract while negotiating his divorce, and did not mention the new job or that he now could pay spousal support.

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Janet learned of Bob’s job years later by happenstance, through their adult daughter. She immediately brought a motion to set aside the divorce agreement. “Had I known, “Janet argued, “that Bob got a new job while we were negotiating, I would have never agreed that Bob does not owe me support.” Cal. Fam Code Sec. 2102 imposes a duty on spouses to disclose, “all assets and liabilities” as well as “all current earnings, accumulations, and expenses,” including an “immediate full, and accurate update or augmentation…” of the disclosure.

Janet contended that Bob had fraudulently misrepresented his employment in December 2005. The trial court denied the motion, finding that Janet should have discovered Bob’s fraud years earlier, and as such the statute of limitations on Janet’s claim had run. Cal. Fam Code Sec. 2122 requires a motion to set aside a family law judgment to be brought within one year of the date the complaining party discovered or “should have discovered” the fraud.

Fortunately, the court of appeal reversed the finding, determining the trial court erred in concluding that Janet “should have discovered” Bob’s violation earlier than she did. Janet’s case is now on remand and she is trying to recover the spousal support she lost because of Bob’s non-disclosure.

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Too oft en in our family law practice we are confronted with the problem of a non-disclosing spouse. Most typically, this is a self-employed spouse or a spouse who runs his or her own business. In those situations, the “out-spouse” oft en claims that the ‘inspouse’s” income greatly exceeds what he reports. Even though the disclosure statutes are in place to protect the “out-spouse” in these situations, a complex investigation and carefully craft ed discovery are oft en required to unearth the true income.

A more egregious (and complicated) situation arises when the non-disclosing spouse engages in what we affectionately call “divorce planning” and has secreted funds and acquired property without his spouse’s knowledge. One of the more startling examples was when a husband over the course of several years transferred, little by little, hundreds of thousands of dollars from the parties’ joint accounts building himself a lavish estate in Jamaica, all without his wife’s knowledge. His resourceful wife, however, discovered this fraud and was able to negotiate a settlement on very favorable terms.

In the above example, Janet got lucky. The court of appeal decided that she acted timely and her recovery is not barred by a statute of limitations. Too oft en, however, clients come to us having discovered their spouse’s wrong-doing years aft er the divorce, and it is too late to act. Of course, this does not apply only to family law; too oft en our clients miss out on recovery because the statute of limitation has run.

The best advice we can offer is, “Do not wait.” If you believe something is wrong, act on it. Share your concern with your attorney immediately. Even if you are unsure in your suspicions, talk to your attorney and discuss the steps that can be taken.

If the client shares his or her concerns timely, we as attorneys are able to create a discovery plan and perhaps engage other professionals such as private investigators or forensic accountants, to discover the true nature of the income, assets or suspicious business activity. Raising a concern and bringing a claim timely may make all the difference between the client receiving his or her fair share and running the risk of the court saying, “You waited too long. It’s too late.” Alex Grager

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